Albania: Business Environment

Company Tax

15%

Tax Rate For Foreign Companies

The Albanian state does not make any difference between foreign and Albanian companies. Nevertheless, non-resident companies are only taxed on their Albanian-sourced income, whereas resident entities are taxed on their worldwide income.
A legal entity is deemed to be resident in Albania if it has its head office or its place of effective management in Albania.

Capital Gains Taxation

Capital gains are considered taxable income and are taxed at the applicable corporate income tax rate of 0%, 5%, or 15%.
Gains on the sale of shares are generally taxed at 15% of the difference between the sale price and the purchase price.

Main Allowable Deductions and Tax Credits

Amortisation of tangible and intangible assets (with the exception of land, fine art, antiques, and jewellery) is tax-deductible. Amortisation rates vary between 5% and 25%. Amortisation of capital assets that exceed the allowable depreciation rates is not deductible.
Interest expenses with rates that exceed the average 12-month credit interest rate applied in the Albanian banking system are not deductible. Interest expenses that take 30% or more of EBITDA are also considered non-deductible. Bad debts can be deducted if the following conditions are simultaneously met:

1. the amount that corresponds to the bad debt was initially included in the income
2. the doubtful debt is removed from the books of account taxpayer
3. the company has taken all possible legal steps to recover its debt.

All costs that are not supported with fiscal invoices or expenses paid in cash of amounts exceeding ALL 150,000 are also considered non-deductible, the same as for benefits in kind and gifts, representation and reception expenses exceeding 0.3% of annual turnover, sponsorship expenses exceeding 3% of profit before tax and sponsorships of press and publications exceeding 15% of profit before tax, and donations for recovery from natural disasters exceeding 5% of profit before tax.

There is no tax regulation regarding donations to charities, fines and taxes paid; however, these are generally considered as non-deductible. Tax losses can be carried forward in full for up to three years (five years for business projects valued above ALL 1 billion). The carryforward is not allowed if more than 50% of the direct or indirect ownership of the share capital or the voting rights were transferred during the fiscal year. The carryback of losses is not allowed.

Other Corporate Taxes

The real estate tax on new construction projects ranges between 4% and 8% of the sale price per square meter on constructions for residential and/or commercial purposes. The rate ranges from 2% to 4% of the investment value in Tirana, from 1% to 3% in other cities for buildings that will be used for tourism purposes or for industry and agriculture, and 0.1% of the investment value for infrastructure projects for the construction of national roads, airports, etc. Four or five-star hotels with special status and agro-tourism entities are exempt from the real estate tax on construction projects.
A property tax is levied on real estate by municipal authorities at variable rates. The property tax is calculated on the market value of the real estate at variable rates depending on the type of building. The rate is 0.05% for residential properties and 0.2% for commercial properties. The tax is levied at 30% of the rate applicable on properties under construction. The property tax on agricultural and urban land is calculated according to the area of ​​the land (from ALL 700 to ALL 5,600 per hectare on agricultural land, from ALL 120,000 to ALL 200,000 per hectare on urban land).

Social security contributions payable by the employer amount to 16.7% of salary (15% for social security, 1.7% for health insurance). For 2023, the gross salary base for calculating social security contributions ranges from ALL 34,000 to ALL 149,953. The employer is required to compute the contributions and submit payment by the 20th day of the subsequent month after the payment was made.

Stamp duties are levied in the form of notary fees that apply to all transactions involving movable and immovable property (levied up to ALL 1,000). Notary fees vary between 0.23% and 0.35% of the transaction value for real estate and between 0.23% and 0.3% for movable property.
Property transfer taxes vary between ALL 100 and ALL 2,000 per square metre for commercial property and amount to 2% of the sale price for any other property.
The fee for the registration of a business entity is ALL 120 (waived if made online).

Other Domestic Resources

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

The minimum taxable income is ALL 40,000. Social and health contributions (SHC) and voluntary pension contributions are deductible from taxable income. Medical expenses, up to ALL 8,532 per year, that are not covered by national insurance are also deductible (the limit is extended to ALL 32,000 if one person submits one personal income declaration as the head of the family). Interest expenses for educational purposes (both self-education and education of children or persons under care) are deductible.

Special Expatriate Tax Regime

Resident natural persons are subject to tax on all income earned both in Albania and abroad. Non-resident persons are subject to income tax, only on Albanian-sourced income, unless a bilateral fiscal convention with the foreign national's country provides otherwise.
To be considered a resident of Albania for tax purposes, an individual must either possess a permanent home in Albania or spend a cumulative total of more than 183 days within the country during a calendar year, regardless of their citizenship or primary interests. The calendar year aligns with the fiscal year.